Gift cards have their drawbacks

Gift cards once again were among the most popular gifts this past holiday season for teens and other young consumers. And that means, once again, that millions of dollars worth of gift cards will go unspent, like so many lumps of coal.

By Steve Rosen

recordnet.com

By Steve Rosen

Posted Jan. 19, 2013 at 12:01 AM

By Steve Rosen

Posted Jan. 19, 2013 at 12:01 AM

» Social News

Gift cards once again were among the most popular gifts this past holiday season for teens and other young consumers. And that means, once again, that millions of dollars worth of gift cards will go unspent, like so many lumps of coal.

According to the National Retail Federation, more than 80 percent of consumers purchased at least one gift card in 2012. But it's a gift that's often forgotten.

From 2005 to 2011, according to published reports, $41 billion on gift cards went unspent. It's safe to say that many of those unused cards are buried in your teen's dresser under a pile of socks.

That's one reason why I'm not a big fan of this plastic. Many are never used or are used once and forgotten, even though there's still a balance. Take my word for it: I have several gift cards that still have a few dollars and change on them.

My advice: If you're going to give a card to your teen, college student or even a 5-year-old, make sure it's one that you're dead certain will be used. I like to give gasoline gift cards to my college-age kids, because I know it's something they'll need and every penny will be spent down to the last digit.

Federal rules established through the Credit Card Act of 2009 have ended some - but not all - of the confusion and bad business practices surrounding gift card expiration dates and nasty inactivity fees.

The law, which took effect in 2010, prohibits cards from expiring before five years and the levying of fees for one year. (Note: Rebate cards, which I wrote about last week, are exempt from these rules.)

Store-branded cards can be used only at a specific retailer or groups of retailers generally owned by the same company. Bank gift cards, which carry the logo of MasterCard or Visa, for example, can be used wherever the brand is accepted.

Here are other key points about gift cards:

» Cards will likely be worthless if the company goes out of business. That was a big issue when Borders closed its bookstores. So use the plastic before you lose it or forget about it.

» Write down the card number, security code and customer service phone number and keep the information in a safe place. Or ask the person who gave you the card for a copy of the gift receipt so you can verify the card's purchase in case it is lost or stolen.

» You can turn the cards you don't want into cash. Among the many sites that act as clearinghouses to buy, sell or trade cards: PlasticJungle.com, CouponTrade.com and CardCash.com.

In addition, some charities will take your gift card and distribute it to those who can put it to use.

Which brings me to my final point about gift cards: Sometimes it's best to give cash or a check so that you can almost guarantee the gift will be used.

Contact Steve Rosen, a personal finance columnist at The Kansas City Star, at srosen@kcstar.com.